Abstract ：
This paper theoretically analyzes how firm location and wage differences among regions affect inter-municipal cooperation. When considering two regions, such as a city and a suburb, the suburb may not desire inter-municipal cooperation because of its low revenue. Industrial location induces the local government to accept such cooperation. The results depend on the population in the peripheral region. When the population is large, the local government in the peripheral region accepts inter-municipal cooperation regardless of the industrial location. Conversely, suppose that the peripheral population is small. In this case, when the manufacturing sector agglomerates in the city, the local government in the peripheral region does not desire such cooperation. The peripheral region's local government accepts cooperation only when the manufacturing sector disperses and wages in the periphery increase sufficiently.

JEL classification: H41, H73, R12, R32

Keywords:Inter-municipal cooperation; Local public goods; Industrial distribution; Consolidation